ORDINANCE

AN ORDINANCE relating to the Firefighters' Pension Fund established under RCW 41.16 as amended; amending Ordinance 117216 to clarify the funding of the Actuarial Account within the Fund; and making a transfer within the Fund to the Actuarial Account.

WHEREAS, on July 11, 1994, the City Council passed Ordinance 117216, establishing an Actuarial Account within the Firefighters' Pension Fund; and

WHEREAS, the intent of Ordinance 117216 was to accumulate sufficient funding in the Actuarial Account to fully amortize all pension obligations by December 31, 2018; and that intention is unchanged; and

WHEREAS, the intent of Ordinance 117216 was to provide a level amount each year for the sum of current pension obligations and contributions to the Actuarial Account, and that intention is unchanged; and

WHEREAS, the Actuarial Account earns its own interest and thus had a balance of $916,437 as of the end of 1996; and

WHEREAS, the phrasing of Ordinance 117216 has caused confusion about the computation methodology for the Actuarial Account and both the Firefighters' Pension Board and the City Council wish to rephrase the description of the actuarial calculations to be performed without changing the original intent of Ordinance 117216; NOW THEREFORE,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. Section 1 of Ordinance 117216 is amended to read as follows:

As requested by the Firefighters' Pension Board (the "Board"), the following funding policy is adopted with respect to the Firefighters' Pension Fund (the "Fund"):

A. Beginning in 19945 , the City will place in a separate "Actuarial Account" within the Fund each year an amount which is sufficient to fully amortize as described below the estimated remaining pension liabilities of the Fund by December 31, 2018((9. Specifically, the City's contribution to the Actuarial Account each budget year beginning in 1995 and continuing through 2019 shall be the "level dollar amount," which is the actuarially determined contribution necessary to pay the annual projected pension benefits and to accumulate by December 31, 2019, sufficient funds to pay the "remaining pension liabilities." The remaining pension liabilities are the actuarially determined future pension benefits payable after 2019 for all members of the Fund and their beneficiaries that will not be paid by the LEOFF system. The amortization period may begin in 1994 and may be completed in 2018 if the condition set forth in paragraph 2 (i) occurs.)) The Actuarial Account will be funded as follows:

1. Each year, the City will appropriate a "Level Payment Amount" to the Fund. The Level Payment Amount is intended to be constant for each year between 1994 and 2018. If necessary, the Level Payment Amount will be modified every two years as specified in subsection A(4) below.

2. In each year, the Level Payment Amount will be the sum of the expected current pension obligations for that year and a contribution to the Actuarial Account. Thus, the transfer to the Actuarial Account may vary in amount from year to year.

3. In some years, the expected current pension obligations will exceed the Level Payment Amount. In such years, the City will appropriate additional funds to the Fund in order to cover all expected current pension obligations. No contribution will be made to the Actuarial Account in such years.

4. The actuarial calculations of the Level Payment Amount and of the portion to be contributed to the Actuarial Account shall be performed in a manner consistent with Attachment A.

5. Beginning in 1998, the Level Payment Amount will be recalculated by June 30 of each even-numbered year by a qualified actuary retained by the Board. While the Level Payment Amount is generally expected to remain constant over time, small variations are likely due to changes in mortality, inflation, and other factors. In addition, the actuary will calculate the expected current pension obligations for each of the two following years. The contribution to the Actuarial Account will be defined as the difference between the Level Payment Amount and the expected current pension obligations for each year. The City will use the actuary's figures in establishing the Level Payment Amount in the biennial budget for the following two (2) years, subject to Board confirmation. In the mid-biennium, the City shall revise the expected current pension obligations based on the actuary's latest estimates, subject to Board confirmation. This may change the contribution to the Actuarial

Account in the second year of each biennium depending on any increases or decreases in expected current pension obligations.

6. In the event that actual current pension obligations for any year exceed the amounts projected by the actuary and included in the budget, the City will appropriate additional amounts to cover any shortfall. Transfers to the Actuarial Account will not be changed once they are included in the Adopted Budget.

7. Funds in the Actuarial Account are for the purpose of meeting pension obligations and funds will not be transferred from the Actuarial Account for any other purpose unless and until all pension obligations of the Fund have been satisfied.

B. Based on((1994)) actuarial projections, it is anticipated that the((l))Level ((dollar ))Payment((a)) Amount will generally exceed the expected current ((projected))pension((payments)) obligations.

C. The level dollar amount shall be placed in the Actuarial Account during the year as the City receives property tax receipts and fire insurance premium tax revenues. The City will invest those funds in the Actuarial Account which are not used to pay pension benefits, as part of its residual cash investment fund and apportion the earnings pro rata.)) In years in which a contribution is to be made to the Actuarial Account, the transfer will occur in two (2) equal installments on the last day of April and the last day of October. The amount transferred to the Actuarial Account on each date will be one-half (1/2) the total amount included as a transfer to the Actuarial Account in the Adopted Budget. The City Finance Director is authorized to make these transfers. Funds in the Actuarial Account will be invested in order to receive the maximum possible returns consistent with State law, the City'sinvestment policies, and the objectives of the Actuarial Account. The City Finance Director will determine how the funds in the Actuarial Account will be invested, consistent with RCW 35.39.030, with confirmation by the Board. The City Finance Director will report to the Board on the status of the Actuarial Account in May and November of each year.

((D. In the event that the level dollar amount does not cover that year's "actual pension benefits," which are those pension benefits that are not paid by the LEOFF system, the City shall pay an "additional sum." The "additional sum" is the amount necesssary to pay that year's actual pension benefits which exceed the level dollar amount. The additional sum shall be placed in the Fund as needed.

E. The 1995 level dollar amount will be Seven Million, Four Hundred and Sixteen Thousand Dollars ($7,416,000), which was determined as part of the actuarial valuation by Wyatt Company dated January 1, 1994. Said valuation was based on the actual current status of the Fund being no net assets. The level dollar amount may be change to Seven Million, Four Hundred Thirty-One Thousand Dollars ($7,431,000) if the condition set forth in paragraph 2 (i) occurs.

F. Every two years as part of the City's biennial budgeting process, the Firefighter's Pension Board will obtain an actuarial valuation from a qualified actuary. The actuarial valuation will include a new level dollar amount amortization schedule through December 31, 2019, for the remaining pension liabilities of the Fund. Thereafter, the City will adopt a new level dollar amount.))

D.G. After 2019, if there are pension liabilities which cannot be met from the balance of the Actuarial Account, the City will pay these liabilities.)) Beginning on January 1, 2019, it is anticipated that funds accumulated in the Actuarial Account will be sufficient to cover all future pension costs of the Fund. If there are pension liabilities that cannot be met from the balance in the Actuarial Account, the City shall appropriate such funds as are required to pay all pension costs.

E. This policy does not change current practices for budgeting for medical and administrative costs of the Firefighters' Pension Fund.

F((H)). The Fund shall be administered pursuant to RCW 41.16 as amended.

((I. If the amount appropriated to the Firemen's Pension Fund in the 1994 budget is underspent by $403,000 or more, $403,000 shall be contributed to the actuarial account to begin funding in 1994. In this event, the 25 year amortization period desribed in paragraph 2 (a) shall be completed by December 31, 2018. $403,000 is the amount necessary to begin a 25 year amortization period beginning in 1994 using the calculation of Wyatt Company.))

Section 2. As a result of the July 1997 actuarial study performed by William M. Mercer, Inc., the actuary for the Firefighters' Pension Fund, the Level Payment Amount for 1998 is established as Seven Million Three Hundred Seventeen Thousand Dollars ($7,317,000). The resulting 1998 contribution to the Actuarial Account is hereby set, with Board approval, at Seventeen Thousand Dollars ($17,000). These amounts will be used by the Office of Management and Planning to propose modifications to the 1998 Endorsed Budget.

Section 3. At the recommendation of the Board, the sum of One Hundred Thirty-Two Thousand Eight Hundred Forty-Five Dollars ($132,845) is hereby transferred from undesignated and unreserved balances in the Firefighters' Pension Fund to the Actuarial Account.

Section 4. This ordinance shall take effect and be in force thirty (30) days from and after its approval by the Mayor, but if not approved and returned by the Mayor within ten (10) days after presentation, it shall take effect as provided by Municipal Code Section 1.04.020.

PASSED by the City Council of the City of Seattle this ______ day of ______________, 1997, and signed by me in open session in authentication of its passage this _____ day of _______________, 1997.

_____________________________________

President of the City Council

Approved by me this __________ day of _________________, 1997.

_____________________________________ Mayor

Filed by me this __________ day of _________________, 1997.

_____________________________________ City Clerk

(Seal)

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Dwight Dively/eh

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